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Monday, December 18, 2006

Europe's Trade Deficit With China

Brad Setser is almost certainly right to keep drawing our attention to the way in which the rise in the Euro has lead to an increased inflow of Chinese goods. Today there is news that Europe's trade deficit with China surged 19 percent year-on-year in the nine months up to September. This is a pretty hefty rate of increase:

The trade deficit with China grew to 63.4 billion euros ($83 billion) in the nine-month period, the European Union's statistics office said today. China is poised to overtake the U.S. this year as the second-biggest source of imports to the euro area, behind the U.K.

The statistics office also said today that the euro area's overall surplus narrowed to a seasonally adjusted 1.7 billion euros in October from a revised 2.4 billion euros the previous month.

And with Germany's exports increasing at a whopping rate, this means that someone else's deficit is taking something of a beating.

Also note that China is not alone in benefiting:

Imports from Japan to the euro region increased 6.7 percent to 41.6 billion euros in the nine-month period. The trade gap with Japan widened 17 percent to 16.2 billion euros.

All those surplus German savings which are getting recycled in the eurozone are it seems indirectly helping Japan with its weak internal consumption problem.

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